TPPA, other FTAs unlikely to lower car prices – report

Last week, the possibility of cheaper cars thanks to trade pacts Malaysia is participating in, like the Trans-Pacific Partnership Agreement (TPPA) and other free trade agreements (FTAs), was mentioned by International Trade and Industry Minister II Datuk Seri Ong Ka Chuan. The Malaysia Automotive Institute (MAI) was on the same page, estimating a 20% to 22% price reduction by 2018.

The Malaysian Automotive Association (MAA), the umbrella body that represents carmakers in Malaysia, took an opposing view, saying that car prices will go up next year due to unfavourable foreign exchange. Indeed, car companies have already announced prices hikes (or the possibility of prices going up) effective next year – Toyota/Lexus started the ball rolling, followed by Honda, Nissan and Mitsubishi.

Today, a report in The Sun says that cheaper car prices may not happen, due to various local reasons.

An industry analyst quoted by the daily said there is every possibility that the government will still enforce excise duty and car companies charge into-showroom cost despite the import duty reduction from various free trade agreements, including the Asean Economic Community and the Asean Free Trade Agreement with Japan and Australia that will come into effect next year.

“The 12-year period will begin from 2018 if any TPPA signatories rectify the agreement within 24 months, starting from December. From there on, there will be continuous import duty reduction of 2.5% a year until 2030,” a source told the publication’s business desk.

“Malaysia largely import cars from Japan, Korea and within the Asean region. So the impact of TPPA on non-Asean cars is unknown. If we look at the current scenario, we are already enjoying zero tax import duty for cars originating from within Asean but do we see significant price reduction in the local markets?” the analyst said.

At present, import duties range from 10% to 30% for CBU vehicles, but it is not the only and biggest factor in coming up with a car’s retail price, which takes into account the vehicle’s ex-factory price, sales tax, excise duty and profit margin of the local distributor.

Excise duties range from 65% to 105%, but some companies enjoy a 40% to 50% rate thanks to high localisation. “Will the government lower, maintain or increase the excise duty by 2018? That’s government prerogative for domestic tax,” the analyst said.

Pertinent question. Oil prices are depressed, which translates to lower revenue at Petronas and the reduction of the oil company’s contribution to the government’s coffers. To make up for that, and to make good its commitment to reduce budget deficit, the government has introduced a subsidy rationalisation programme and the Goods and Services Tax (GST). Looking at this trend, it’s not likely that the government will forgo income from vehicle sales, but we’re happy to be wrong on this.

The report’s source also raised another factor that often escapes scrutiny by the buying public – the car companies and their profit margins. “I am convinced that the car dealers would still want to maintain or increase the profit margin even though the various trade agreements will provide lower tariffs and bigger access to larger markets,” he said.

One shouldn’t get his/her hopes for cheaper cars too high, although it’ll take more than a minister’s statement or two to convince the skeptical Malaysian consumer.

Danny Tan loves driving as much as he loves a certain herbal meat soup, and sweet engine music as much as drum beats. He has been in the auto industry since 2006, previously filling the pages of two motoring magazines before joining this website. Enjoys detailing the experience more than the technical details.

if your salary RM 2,500 or even less you can afford to own a car in malaysia. so if you live in singapore for example, how much you have to earn to own a car there in singapore ? … i believe uneducated ppl like are useless in our country

Wake up BN supporter, s’pore public transportation are among the top in the world, why you need a car when you have a affordable, fast and realible transportation !!! EVEN s’pore cars are cbu yet Bolehland cbu cars are not that cheap either but Malaysian average salary are below pair !!!

to all uncivilzed comments, i am not bn supporter neither utusan boy, i am giving you an example, a RM2,500 is a salary of a fresh graduate guy with zero working experience, i meant even a fresh graduate can own a car which is great enough, please do more reading and study other ppl life in diff countries in order for you to be greatful for what you have..

Well if we compare ourselves with donkey countries definitely it sort of console us abit. But that doesn’t mean that you should be happy or grateful when there’s always someone occupying the last spot before you and you are at 2ND last in class

true, but the pitfall in your argument is SG has perhaps the best transportation system in this part of the world. decades better than us. every part of the city is connected to each other by public transport, negating the need for personal vehicles. in MY, unless you live in big cities ie KL, penang or maybe JB, then public transport is scarce.

Now even experts and analysis show that the market won’t drop car price as “BN ministry statement”. So why Rakyat need to help/fool by BN crony companies to settle debts and suffer from signing TPPA ??? Ministry just simply making “unlogical and empty promise to blind Rakyat” !!! Rakyat time to change !

They talk and talk and talk and talk.
At they expect us to wait while insignificant drop happen evethough we have already sign AFTA since 2001.

The most effective way is to boycott any new cars – import or local. If all of us maintain our cars and refuse to buy any new cars. Stock will not moving, inventory will increase, and what can they do except to reduce price. Whatever they say will be irrelevant.

The question we must be asking is, where is Najib’s promise to reduce car prices?

Where is Najib’s promise? Najib promised 30 million people 2 years ago before the election that he would reduce car prices by 30 percent.

He said the 30 million people need not worry because BN always kept their word and never mungkir janji. He said if people voted for BN, he was 100% sure to reduce car prices by 30 percent.

Najib, in his speech told people that BN knew how much people suffered paying for their cars and he felt very sorry for the people, thus, he was sure to reduce car prices by 30%.

It is a well known fact, that we Malaysians are paying 3x the global prices of cars. And double whammy, not only we pay 3x the global prices of cars, our cars are stripped down so bad, it hardly lacks any safety features. Even our top D segment cars each have about 20 less safety features than the same car costing 3 times less overseas. For example, a 10 airbag Toyota Camry CBU in the US cost US$22,000. In Malaysia, this cost RM180k despite CKD AND loads of safety spec taken out. For example Tyre Pressure Monitoring System, 10 airbags, Lane Change Alert and many others.

Camry Hybrid in the US is US26,000. Come to Malaysia, should be tax free. CKD it using Malaysian parts should be even cheaper. But here sell RM175k

Now, what happened Najib? Where is your promise? No need TPPA. Where is own own PM’s promise?

Najib also said that by 2020, we would become high income nation. He said our GDP per Capita would be US$48,000. That would mean, per month, the average Malaysian would be earning US$4000 (RM18,000) per month.

Raja Nazrin, Sultan of Perak said this was pure lies. He said it is an utter lie because 78% all EPF contributors are earning RM1200 and below.

AFTA was implemented in 2001. That means we supposed to get tax free cars from Asean. BMW, Honda and Toyota all make their cars in Thailand.

Somehow, that snake Madani and his buddies in MITI managed to curcumvent implementing AFTA. They raised excise duties to such a level, we Malaysians still suffer.

By right since 2001, Malaysians should be enjoying cheap cars from any ASEAN country. See how we are cheated. And then, every NAP, Madani will kelentong and bluff about how good NAP is and how the AP PEKEMA people need to be protected.

30 AP PEKEMA members become billionaire (not millionaire) whilst 30 million people suffer with high car prices.

IF car prices going down i’m absolutely sure gov will raise others eg. oil price,insurance,roadtax,etc. Gov will never want people live happily. Why? if people struggling they will need government. If people hidup senang kaya raya who will need government?

Hahaha, we are lucky because we are full with resources and money…..so songlap everywhere ….

Car price lower down? Dream on lah……Jibby and hippopotamus already destroyed our country, they concern on their own rather than the poor rakyat….if the boss also like that, u think all the people work under them will not do the same?

The problem now is the Malay friends, those who keep silent are either – 1. those sama-sama makan dengan f*** jibby, 2. those who waiting for a change in next election 3.or those who are staying in kampung and still buta-buta tak tahu pasal their boss is sapu-ing the billions.

I am sometimes pity about the malaysian. They dont fight, they just quietly go to street there and pretend to protest with so called “BERSIH”.

Haha, jibby and the hippotamus are watching you – Malaysians like idiots man. They are counting money while you guys sweating and shouting with slogan.

Like Tun M said, if this case happen in other countries, rakyat already protest on the street and even stop working. Ex: All workers in office stop to work for 1-3 days. See how our government going to react on that.

Haha, but too bad lah, rakyat Malaysia is enjoying their life makan nasi lemak saja, they dont realise if we have a better government like Sg, they can even give back money to their rakyat by investing money using their EPF fund and earn money and somemore giving back to their citizens. Sigh, malay malay. Senang ditipu oleh orang sendiri….kasihan nya….

The second last paragraph in the article is actually very true. Most Malaysians SELDOM fault the local distributors and assemblers for high car prices. The reality is, some of the car companies here do have sizeable profit margins, while others have none at all, and some lose money on each car sold. It’s impossible to determine their profit margins, it’s a company secret after all. The best you can get is the annual report on financial gains/ losses, but that’s just a small part of a much bigger picture.

There is a lot that our car companies don’t want us to know. They want us to remain oblivious to the inner workings of the industry. The moment consumers get smarter, the moment we know ‘too much’, that’s when they lose money.

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